Markets bounce back as calm returns
Fall in yen triggers rally in Hong Kong and regional stocks
Hong Kong and other Asian stock markets rebounded yesterday from a slump on Monday when investors sold down their holdings amid a rising yen.
'After [Monday's] panic sell-off, investors calmed down a little bit,' said Alex Wong, a fund manager at Ample Capital. 'It's a normal technical rebound as the market had been oversold but it doesn't mean it's a one-day reversal to a bull run.'
The Hang Seng Index climbed 393.68 points or 2.11 per cent to 19,058.56 after diving 4 per cent on Monday when its 777.13-point fall was its largest point drop since the September 11, 2001, terrorist attacks in the United States. The H-share index recovered 3.57 per cent to 8,833.25 points, recouping part of Monday's 5.09 per cent loss.
Market turnover shrank to HK$61.03 billion from Monday's HK$72.44 billion, the fifth-largest to date.
HSBC Holdings gained 2.63 per cent to HK$136.50 after the lender on Monday posted a 4.7 per cent rise in net profit for last year that was in line with expectations.
The five mainland banks and three insurers drew buying after the steep falls. China Life Insurance leapt 6.7 per cent to HK$20.55, Industrial and Commercial Bank of China surged 5.26 per cent to HK$4.20 and Bank of Communications rose 6.12 per cent to HK$7.46.
'Valuations of [mainland] banking and insurance companies have become more reasonable after a dip of some 20 per cent year to date,' Dao Heng Securities said in a daily note yesterday. 'Upcoming announcements of their financial results for [last year] are expected to meet market expectations because analysts have traditionally underestimated earnings of H shares.'
Lifted by a 0.86 per cent dip in the yen to 116.65 from 115.66 to the US dollar, a reversal of its recent trend, most stock markets in the region rebounded.
Japan's Nikkei-225 Index gained 1.22 per cent, the Shanghai A-Share Index rose 1.98 per cent, South Korea's Composite Index jumped 1.95 per cent and the Singapore Straits Times Index gained 1.82 per cent. The markets shrugged off Monday's 0.53 per cent drop in the Dow Jones Industrial Average amid concern about a possible US economic slowdown.
Merrill Lynch economist Timothy Bond said in a report that despite a US slowdown, Asian economies had become resilient on strong domestic demand.
Hantec Investment research director Michael Wong said the market correction had yet to end, hinging on how swings in the yen would affect global carry trades.
Mr Bond expected carry trades to continue to be unwound and lead to Asian equities being sold as yen loans were repaid.
Mr Wong said the Hang Seng Index would consolidate between the 18,500 and 19,400 levels for up to a month.
